Accounts Receivable is classified as which type of account, and what is its normal increase side?

• A. Liability, Cr
• B. Expense, Dr
• C. Asset, Dr
• D. Revenue, Cr

Answer: (C)

Accounts receivable represents amounts customers owe us after a sale on credit, so it is an asset. Asset accounts have their normal balance on the debit side, meaning increases are recorded on the left. Therefore, when a sale on account happens, we debit accounts receivable to reflect the amount owed. When the customer pays, we credit accounts receivable to reduce the asset. The other classifications don’t fit: a liability would increase on the credit side, an expense increases with a debit but isn’t an asset, and revenue increases on the credit side but isn’t an asset.